New Home Sales - NOW and BEFORE THE SHIT HIT THE FAN

[Neubarth]

Look, the two of you are saying teh same thing.

Actually, NOT! She is saying that there are too many houses on the market because too many were built.

I am saying that there are too many houses on the market because there is a shortage of buyers because of this horrific depression.

She is denying the economic collapse. I am confirming it as the present ugly reality. We both know that there are more houses than buyers.

There was no tremendous increase in houses being built during the Boom years of 2005 - 7. There was a slight increase because of the good economy.

What we have seen in the past two years is a tremendous decrease in buyers because of the economy. Now, three out of every four construction workers are out of work or underemployed in their trades. This present malaise is not normal no matter how much she wants to believe it is. Normal was what we had in 2005. Abnormal is what we have now.

You're both right. Too many were built AND there is a shortage of qualified buyers.

And what personal and/or financial stake do you have in the home construction industry, anyway?

I have no interest in the home construction industry. I post on this board about the economy overall because of all of the lies generated by the Obama administration about an imaginary recovery that simply is not there.

I disagree with you about too many houses being built. That has not been the problem. We have too few buyers because of this Ugly Depression. Usually, the areas that have the most houses also have the highest unemployment rate.

That is because there is a shortage of first time buyers (usually young couples) and because unemployed people are having their houses foreclosed on because they can not make the payments. those houses are sold at auction and flood the market in economically hard hit areas like Las Vegas or California or Michigan or Ohio......

Almost all of those foreclosures were because of lost employment and inflated house valuations, not because too many houses were built.

All those unemployed people just do not try to buy. I wonder why?

 

[The Rabbi]

What do we mean, "too many houses"? It means more than there are buyers for them. There are fewer buyers for a lot of reasons, high unemployment among them. Tightening credit criteria is another reason.
Too many houses is the flip side of not enough buyers. If we bulldozed 20% of houses on the market we might get back to market equilibrium. That's actually happening in some places.

 

[Care4all]

Actually, NOT! She is saying that there are too many houses on the market because too many were built.

I am saying that there are too many houses on the market because there is a shortage of buyers because of this horrific depression.

She is denying the economic collapse. I am confirming it as the present ugly reality. We both know that there are more houses than buyers.

There was no tremendous increase in houses being built during the Boom years of 2005 - 7. There was a slight increase because of the good economy.

What we have seen in the past two years is a tremendous decrease in buyers because of the economy. Now, three out of every four construction workers are out of work or underemployed in their trades. This present malaise is not normal no matter how much she wants to believe it is. Normal was what we had in 2005. Abnormal is what we have now.

but there was NO GOOD ECONOMY....the ''supposed'' good economy CAME from the housing BUBBLE.....people took out second mortgages or took out the increased FAKE EQUITY in their homes to use, to spend....

the WHOLE THING was a sham....there was no ''good'' economy....there was no rising pay for the middle class....only rising productivity.

You truly are at sea here. No good economy, only rising productivity? Hello? How else do you define a good economy?
We had seven years of low inflation, low interest rates, low unemployment, and rising GDP following the Bush tax cuts. I believe it was the second highest record for expansion post-WW2. If that is a sham then I want more of them.

yes rabbi...please, for goodness sakes, you are smarter than you come off....

low inflation...my ass....healthy food and gas and heating oil rose through the roof....sure you could get a 42 inch flat screen for $599 and a pair of all leather pumps from china for $59 but who gives a crap about that?

fairly low unemployment, and the rising gdp was a DIRECT and indirect result of the housing boom and equity being taken out of the home, as the supposed home value grew....

the whole thing was a sham rabbi, and i stick by it!

 

[The Rabbi]

Yes, please tell me how Bush managed to change the inflation numbers for seven years with no one noticing it. That will really add to your credibility here. Seven years of sham prosperity. Give me more of that!
Oh yeah, and gas prices rose AFTER the Democrats in Congress took control and passed ethanol regs etc. Please tell me how Bush was responsible for that too.

And I am still waiting for an answer to my simple question: What change in derivatives regulation would have prevented the current problem?

 

[Care4all]

Yes, please tell me how Bush managed to change the inflation numbers for seven years with no one noticing it. That will really add to your credibility here. Seven years of sham prosperity. Give me more of that!
Oh yeah, and gas prices rose AFTER the Democrats in Congress took control and passed ethanol regs etc. Please tell me how Bush was responsible for that too.

And I am still waiting for an answer to my simple question: What change in derivatives regulation would have prevented the current problem?

how old are you? either too young to remember or too old to have the sense to remember....

gas was less than a dollar a gallon under clinton, at least for a short while....about $1.30 a gallon in the northeast at the jan '01 bush inauguration....

after such, speculation went through the roof...it sky rocketed in price from there on out....

the artificially low interest rates LEAD US IN TO THE BUBBLE Rabbi...for goodness sakes, you are being stubborn and blind as a bat at that!

the money being spent growing our gdp was the housing boom and also was people borrowing money from the FAKE/FAUX rising equity in their homes....it DID NOT come from a rise in income average or come from savings....the growth came from borrowing, and easy as pie borrowing with artificially low interest rates, at that! and the spending with that borrowing.

i'm not certain on the derivative thingy, I suppose the amount/higher percentage of cash on hand to place their bet could have curbed the risks they took...

 

[boedicca]

You are coming across as a totally ignorant liberal, refusing to see the reality as manifest in the numbers that show that the sales have plummeted because of a lack of buyers. Saying as you are, "Nah Nah Nah Nah Nah" and putting your head in the sand does not disprove that there is a shortage of financially capable buyers.

If they had jobs, they would be buying. You still have the cart before the horses. You make me laugh with your childish behavior.

And you are coming across as completely illiterate regarding economics, business, and human nature.

But thanks for playing.

One question: if a glut is not, as you imply, excessive supply above the levels supported by demand, what is it?

 

[boedicca]

Look, the two of you are saying teh same thing.

Actually, NOT! She is saying that there are too many houses on the market because too many were built.

I am saying that there are too many houses on the market because there is a shortage of buyers because of this horrific depression.

She is denying the economic collapse. I am confirming it as the present ugly reality. We both know that there are more houses than buyers.

There was no tremendous increase in houses being built during the Boom years of 2005 - 7. There was a slight increase because of the good economy.

What we have seen in the past two years is a tremendous decrease in buyers because of the economy. Now, three out of every four construction workers are out of work or underemployed in their trades. This present malaise is not normal no matter how much she wants to believe it is. Normal was what we had in 2005. Abnormal is what we have now.

but there was NO GOOD ECONOMY....the ''supposed'' good economy CAME from the housing BUBBLE.....people took out second mortgages or took out the increased FAKE EQUITY in their homes to use, to spend....

the WHOLE THING was a sham....there was no ''good'' economy....there was no rising pay for the middle class....only rising productivity.

BINGO.

It was the housing equivalent of the dotcom bubble. Just as during the dotcom bubble, fundamental metrics were disgarded in favor of ultimately uneconomic ones.

Eyeballs don't equal cash flow. Faux Egalitarianism doesn't equal ability to pay a mortgage.

 

[boedicca]

You truly are at sea here. No good economy, only rising productivity? Hello? How else do you define a good economy?
We had seven years of low inflation, low interest rates, low unemployment, and rising GDP following the Bush tax cuts. I believe it was the second highest record for expansion post-WW2. If that is a sham then I want more of them.

Here's how: the government redefined how unemployment was counted to exclude the long term unemployed who have given up. (check Shadow Stats for what the measurements would look like if calculated with a consistent methodology. Shadow Government Statistics - Home Page).

It's easy to have a false sense of growth for a time when the easy money and loose credit drive consumer spending until the bills ultimately come do. Our economic growth was the equivalent of someone taking out a few dozen credit cards and living a lifestyle he couldn't afford on his income. Government spending has grown faster than the economy and debt levels have exploded as a result. Future growth will be anemic for along time as we deal with this hangover.

Was it worth it? The only people who will answer yes are those who fed from the public trough at the expense of those of us who pay the taxes.

 

[bugs]

i Love Shadowstats.. John Willams is GREAT!

 

[boedicca]

Indeed. It's wonderful to have access to info from someone who cuts through the government statistical BS.

 

[Neubarth]

You truly are at sea here. No good economy, only rising productivity? Hello? How else do you define a good economy?
We had seven years of low inflation, low interest rates, low unemployment, and rising GDP following the Bush tax cuts. I believe it was the second highest record for expansion post-WW2. If that is a sham then I want more of them.

Here's how: the government redefined how unemployment was counted to exclude the long term unemployed who have given up. (check Shadow Stats for what the measurements would look like if calculated with a consistent methodology. Shadow Government Statistics - Home Page).

It's easy to have a false sense of growth for a time when the easy money and loose credit drive consumer spending until the bills ultimately come do. Our economic growth was the equivalent of someone taking out a few dozen credit cards and living a lifestyle he couldn't afford on his income. Government spending has grown faster than the economy and debt levels have exploded as a result. Future growth will be anemic for along time as we deal with this hangover.

Was it worth it? The only people who will answer yes are those who fed from the public trough at the expense of those of us who pay the taxes.

Queen of the Britons, you and I agree again to a degree. Our economic growth was fueled by actual expansion but complimented with too much easy credit and lack of institutional control on the Banks and their corrupt practices. That lack of institutional control resulted in the financial crisis. The financial crisis brought about the recession and the recession has now brought us into Depression. The Depression is feeding itself and nobody is doing anything substantive to stop it.

"It's Alive! It's Alive!"

 

[The Rabbi]

You truly are at sea here. No good economy, only rising productivity? Hello? How else do you define a good economy?
We had seven years of low inflation, low interest rates, low unemployment, and rising GDP following the Bush tax cuts. I believe it was the second highest record for expansion post-WW2. If that is a sham then I want more of them.

Here's how: the government redefined how unemployment was counted to exclude the long term unemployed who have given up. (check Shadow Stats for what the measurements would look like if calculated with a consistent methodology. Shadow Government Statistics - Home Page).

It's easy to have a false sense of growth for a time when the easy money and loose credit drive consumer spending until the bills ultimately come do. Our economic growth was the equivalent of someone taking out a few dozen credit cards and living a lifestyle he couldn't afford on his income. Government spending has grown faster than the economy and debt levels have exploded as a result. Future growth will be anemic for along time as we deal with this hangover.

Was it worth it? The only people who will answer yes are those who fed from the public trough at the expense of those of us who pay the taxes.

The gov't redefined unemployment? Did they do it again to get the numbers to go from under 5% to over 10%?
Unless GDP has declined to less than what it was in 2001 then the growth we experienced was real and sustainable.

 

[The Rabbi]

i'm not certain on the derivative thingy, I suppose the amount/higher percentage of cash on hand to place their bet could have curbed the risks they took...

If you mean reserve requirements at banks then you have demonstrated conclusively that you don't have clue one as to what you are talking about. Those reserve requirements have diddly squat to do with derivatives.
Please, try to stick to something you have some knowledge about. I don't know what that might be because I have yet to see a post that demonstrates it.

 

[bugs]

i'm not certain on the derivative thingy, I suppose the amount/higher percentage of cash on hand to place their bet could have curbed the risks they took...

If you mean reserve requirements at banks then you have demonstrated conclusively that you don't have clue one as to what you are talking about. Those reserve requirements have diddly squat to do with derivatives.
Please, try to stick to something you have some knowledge about. I don't know what that might be because I have yet to see a post that demonstrates it.

Well.. All i Know is That Homes Are Not Selling Worth A Shit.. Their Value is Going DOWN and it's Becoming Almost Impossible To Find a Good Job!

 

[The Rabbi]

i'm not certain on the derivative thingy, I suppose the amount/higher percentage of cash on hand to place their bet could have curbed the risks they took...

If you mean reserve requirements at banks then you have demonstrated conclusively that you don't have clue one as to what you are talking about. Those reserve requirements have diddly squat to do with derivatives.
Please, try to stick to something you have some knowledge about. I don't know what that might be because I have yet to see a post that demonstrates it.

Well.. All i Know is That Homes Are Not Selling Worth A Shit.. Their Value is Going DOWN and it's Becoming Almost Impossible To Find a Good Job!

Yes. And that will continue to get worse under this administration. At least until November when the GOP takes over and puts DOA on the rest of Obama's agenda.

 

[Care4all]

i'm not certain on the derivative thingy, I suppose the amount/higher percentage of cash on hand to place their bet could have curbed the risks they took...

If you mean reserve requirements at banks then you have demonstrated conclusively that you don't have clue one as to what you are talking about. Those reserve requirements have diddly squat to do with derivatives.
Please, try to stick to something you have some knowledge about. I don't know what that might be because I have yet to see a post that demonstrates it.

Criticisms

Derivatives are often subject to the following criticisms:

Possible large losses

See also: List of trading losses

The use of derivatives can result in large losses because of the use of leverage, or borrowing. Derivatives allow investors to earn large returns from small movements in the underlying asset's price. However, investors could lose large amounts if the price of the underlying moves against them significantly. There have been several instances of massive losses in derivative markets, such as:

* The need to recapitalize insurer American International Group (AIG) with $85 billion of debt provided by the US federal government.[10] An AIG subsidiary had lost more than $18 billion over the preceding three quarters on Credit Default Swaps (CDS) it had written.[11] It was reported that the recapitalization was necessary because further losses were foreseeable over the next few quarters.
* The loss of $7.2 Billion by Société Générale in January 2008 through mis-use of futures contracts.
* The loss of US$6.4 billion in the failed fund Amaranth Advisors, which was long natural gas in September 2006 when the price plummeted.
...
* The bankruptcy of Orange County, CA in 1994, the largest municipal bankruptcy in U.S. history. On December 6, 1994, Orange County declared Chapter 9 bankruptcy, from which it emerged in June 1995. The county lost about $1.6 billion through derivatives trading. Orange County was neither bankrupt nor insolvent at the time; however, because of the strategy the county employed it was unable to generate the cash flows needed to maintain services. Orange County is a good example of what happens when derivatives are used incorrectly and positions liquidated in an unplanned manner; had they not liquidated they would not have lost any money as their positions rebounded.[citation needed] Potentially problematic use of interest-rate derivatives by US municipalities has continued in recent years. See, for example:[12]

Counter-party risk

Derivatives (especially swaps) expose investors to counter-party risk.

For example, suppose a person wanting a fixed interest rate loan for his business, but finding that banks only offer variable rates, swaps payments with another business who wants a variable rate, synthetically creating a fixed rate for the person. However if the second business goes bankrupt, it can't pay its variable rate and so the first business will lose its fixed rate and will be paying a variable rate again. If interest rates have increased, it is possible that the first business may be adversely affected, because it may not be prepared to pay the higher variable rate.

Different types of derivatives have different levels of risk for this effect. For example, standardized stock options by law require the party at risk to have a certain amount deposited with the exchange, showing that they can pay for any losses; Banks who help businesses swap variable for fixed rates on loans may do credit checks on both parties. However in private agreements between two companies, for example, there may not be benchmarks for performing due diligence and risk analysis.

Large notional value

* Derivatives typically have a large notional value. As such, there is the danger that their use could result in losses that the investor would be unable to compensate for. The possibility that this could lead to a chain reaction ensuing in an economic crisis, has been pointed out by famed investor Warren Buffett in Berkshire Hathaway's 2002 annual report. Buffett called them 'financial weapons of mass destruction.' The problem with derivatives is that they control an increasingly larger notional amount of assets and this may lead to distortions in the real capital and equities markets. Investors begin to look at the derivatives markets to make a decision to buy or sell securities and so what was originally meant to be a market to transfer risk now becomes a leading indicator.

Leverage of an economy's debt

Derivatives massively leverage the debt in an economy, making it ever more difficult for the underlying real economy to service its debt obligations, thereby curtailing real economic activity, which can cause a recession or even depression... (See Berkshire Hathaway Annual Report for 2002)

Benefits

Nevertheless, the use of derivatives also has its benefits:

* Derivatives facilitate the buying and selling of risk, and many people consider this to have a positive impact on the economic system. Although someone loses money while someone else gains money with a derivative, under normal circumstances, trading in derivatives should not adversely affect the economic system because it is not zero sum in utility.

CONTINUED HERE> Derivative (finance) - Wikipedia, the free encyclopedia

 

[The Rabbi]

Wow! A whole Wiki article. This is the total of your knowledge on this subject.
Color me impressed. Not.

 

[SFC Ollie]

New home sales drop 11 percent in January, new low


Sales of new homes plunged to a record low in January, underscoring the formidable challenges facing the housing industry as it tries to recover from the worst slump in decades.

The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who were expecting a 5 percent increase over December's pace.

New home sales drop 11 percent in January, new low - Yahoo! News


basically we are screwed.

 

[Care4all]

New home sales drop 11 percent in January, new low


Sales of new homes plunged to a record low in January, underscoring the formidable challenges facing the housing industry as it tries to recover from the worst slump in decades.

The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who were expecting a 5 percent increase over December's pace.

New home sales drop 11 percent in January, new low - Yahoo! News


basically we are screwed.

We are DOUBLY SCREWED, the hubby and I moved here and bought our house, paid cash for it, at the peak of the Boom, in 2006..... we will never ever, ever see the money we paid for it, in our lifetime, when we sell it....at least I do not believe we will.... it stinks big time....!

those that bought their homes before the boom, haven't lost a thing, but paper value....those that bought during the latter of the boom, will probably never recoup what they paid, for the most part....at least not for another 20 years....

the rule used to be....under normal sale circumstance and not an "artificially made housing boom", if you own your home for 5 years, you would have enough equity from market increases in it, to sell it, pay the Realtor their commission for the sale, and come home with a little extra change in your pocket that you could upgrade the next home with....

 

[SFC Ollie]

New home sales drop 11 percent in January, new low


Sales of new homes plunged to a record low in January, underscoring the formidable challenges facing the housing industry as it tries to recover from the worst slump in decades.

The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who were expecting a 5 percent increase over December's pace.

New home sales drop 11 percent in January, new low - Yahoo! News


basically we are screwed.

We are DOUBLY SCREWED, the hubby and I moved here and bought our house, paid cash for it, at the peak of the Boom, in 2006..... we will never ever, ever see the money we paid for it, in our lifetime, when we sell it....at least I do not believe we will.... it stinks big time....!

those that bought their homes before the boom, haven't lost a thing, but paper value....those that bought during the latter of the boom, will probably never recoup what they paid, for the most part....at least not for another 20 years....

the rule used to be....under normal sale circumstance and not an "artificially made housing boom", if you own your home for 5 years, you would have enough equity from market increases in it, to sell it, pay the Realtor their commission for the sale, and come home with a little extra change in your pocket that you could upgrade the next home with....

I can only hope we can sell it at all when we are ready to. I've spent more fixing it up than we 've built in equity in 9 years.